Marshall & Swift/Boeckh says it makes millions of phone calls to policyholders each year on behalf of insurance companies to help pinpoint underinsured customers. The company also sells insurers estimating software that is more sophisticated than the old method of calculating replacement costs by multiplying the square footage of a house by the going construction rate.
Senior Vice President Peter Wells predicts the firm's next survey will show another drop in the percentage of underinsured policyholders because of the industry's new push. But, he said, the company is still "concerned about undervaluation."
For More Information
Some useful Web sites on homeowners insurance:
• www.mdinsurance.state.md.us from the Maryland Insurance Administration. Click on "Consumer Information" for a consumer's guide and a comparison guide of rates in 10 different Zip codes in the state.
• www.state.va.us/scc/division/boi from the Virginia Bureau of Insurance, a division of the Virginia State Corporation Commission. Click on "Consumer," then under "How can we help you?", click "Want one of our publications?" for a guide to homeowners/renters insurance.
• www.disr.washingtondc.gov from the D.C. Department of Insurance, Securities and Banking. Click on "Insurance Industry" for consumer information.
• www.iii.orgfrom the Insurance Information Institute. Click on the left side on "home." The site also has information in Spanish.
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How to Keep Premiums Low
The Insurance Information Institute and the Consumer Federation of America offer these suggestions on how to keep premiums low:
• Shop around. Check at least three to five reputable companies for comparable coverage. "People can save $100 on average if they spend an hour" shopping around, said J. Robert Hunter of the Consumer Federation. The savings are based on focus groups.
• Make sure your credit report is accurate . In most states, insurance companies can use your credit score to deny coverage, set rates or offer discounts. Maryland bans the use of credit scores in denying insurance.
• Increase the deductible. If the deductible is increased from $250 to $1,000, you could save at least 25 percent in annual premiums.
• Ask companies if you will get a discount if you buy auto and life insurance from them, too. But check both the combined costs of the premiums and the costs of individual products from different companies.
• Add security devices, sprinkler systems and fire alarms. Insurers offer discounts for such items.
• Check whether your insurer charges more if you have a dog or a particular breed of dog. Because dog bites now account for almost a quarter of all homeowners insurance liability claims -- about $345.5 million annually -- some insurers are clamping down. Some require dog owners to sign liability waivers for dog bites, while others charge more for owners of breeds such as pit bulls and Rottweilers. Others won't write insurance for dog owners at all.)
Here are the three most important questions to ask your agent, said Carolyn Gorman, vice president of the Insurance Information Institute:
• If my house is destroyed, do I have enough insurance to rebuild it?
• If my house is destroyed, do I have enough insurance to replace my personal property?
• Do I have enough insurance to protect my assets if I'm sued?
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Valuation is not a simple concept. Typically if you insure a house for 80 to 100 percent of its estimated value, the insurer will consider the house fully covered. But if you insure a house for less than 80 percent, the insurer may repay you for only a percentage of the loss.
"If a house is worth $1 million [to replace], for instance, and you insure it for only $500,000 and then have a $400,000 loss, they'll cut their payment in half and only pay $250,000, instead of $400,000," said Lawrence H. Mirel, head of the District's Department of Insurance, Securities and Banking. That's because you only insured half the value of the house -- $500,000 instead of $1 million.
"Most people don't pay attention" to the details of their insurance coverage, Mirel said, "but they should."
Because the rules have changed on guaranteed full-replacement coverage, Mirel and other regulators say homeowners should keep agents informed of improvements that affect their home's value.
Remodeling, said insurance consultant Wells, "has the largest impact" on an insurer's portfolio and calculations of risk. "About 5 percent of a book of business changes every year due to remodeling and most of that is not reported to insurers," said Wells.
With remodeling spending at a record $130.4 billion in 2003, that's a big potential impact, said Wells and other industry experts.
Homeowners in the Washington area don't seem all that worried about underinsurance, according to local insurance regulators. They say consumers complain more about how particular claims were handled than about the amount of coverage they have.
"We get about an equal number of complaints from people that think they are underinsured and from those who think they are overinsured," Maryland Insurance Commissioner Alfred W. Redmer Jr. said in an interview this week. He said some homeowners hurt by flooding during Hurricane Isabel have protested that they have to carry too much coverage under the national flood insurance program.
Others, he said, have contended that they didn't have enough coverage on the contents of their houses. "They allege that nobody ever offered it to them," Redmer said. Content coverage is typically 50 percent of the house's value.
Redmer said his agency handled about 2,500 complaints last year after the hurricane.
"The most important thing for homeowners, I believe, is that periodically all of us, regardless of our circumstances, need to sit down with an educated, trusted adviser and identify our personal exposure to risk, not just for our homes, but for our automobiles, our life insurance and our health insurance," Redmer said. "And then we need to make informed decisions about what we're going to do about" those risks.
That, he said, "can range from doing nothing, and accepting that risk, to transferring that risk to an insurer" for a specific dollar amount of coverage at a specific premium.
